1. Field of the Invention
The present invention relates to a system and method that enables the establishment of prices for products via a network and the subsequent acquisition of such products from local retailers that honor the established prices.
2. Description of the Related Art
The retail system as practiced today represents the principal system for the sale and distribution of over one trillion dollars per year in goods and services. It is a process that has developed over the past several decades with well-defined, traditional roles for its various participants: manufacturers, distributors, and retailers.
As the retail process has developed and is currently practiced, a manufacturer has the responsibility for designing, manufacturing (or having made) and selling products to a distributor/retailer. The manufacturer's price, also known as the factory price, is typically set sufficient to recoup costs of manufacturing, plus to return a profit to the manufacturer.
The distributor function, when utilized, is to efficiently and cost effectively move products from the manufacturer to the retailer. The retailer's responsibilities include product distribution, retail pricing, and direct customer sales and services. As will be understood from a further consideration of the invention as described below, the present invention is directed to systems and processes which enable the manufacturer to significantly affect the ultimate price of his products to the consumer.
As will be appreciated by those skilled in the art of retailing, pricing represents one of the most critical aspects of the retail process. Product pricing directly affects consumer demand, which in turn affects product movement, profitability, and the subsequent business directions and strategies of the various participants in the process. Historically, however, customer pricing has remained almost totally within the purview of the retailer. As will be seen below, the ability to affect product retail prices is highly desirable to and has been the focus of many different manufacturer efforts over the years.
Once a product enters into the channel, distributors and retailers are motivated by their own goals and measurements, which directly affect product pricing, and which may differ significantly from those of the manufacturer. As the ultimate determinant of the retail price, the retailer is typically motivated to sell goods in a manner that realizes the highest profit margins for his business.
Thus, while a manufacturer is constantly striving towards his own goals, for example to sell more products, improve current products, develop new products, or distribute newly developed and manufactured goods, he has been consistently lacking in one of the key tools most effective in obtaining these goals—the customer pricing of his product. Not only does a manufacturer lack control over retail pricing, but his channel often uses their control over pricing to directly conflicting ends. A manufacturer, for example, may be lowering a distribution price to motivate the sale of an expiring product line, while the retailers are maintaining high customer prices to maximize profit. Such an artificially high retail price could subsequently result in a glut of highly discounted, left over old product that is in direct competition with the subsequently introduced new product. In fact, a typical retailer carries brands from competing manufacturers, and thus may work against one manufacturer in favor of a direct competitor.
In the course of the development of the retail process, manufacturers have attempted to implement many different methods of exercising more control over retail pricing. At one time, for example, manufacturers were permitted to set minimum retail prices, and to require the sale of tied product combinations. Today, of course, such practices have been deemed illegal as anti-competitive. Regardless, they still did not yield the level of control that manufacturers desired.
Another attempt to exert control over retail pricing is seen in manufacturers' efforts to manipulate customer price through the use of paper discount coupons. In theory, such coupons permit a manufacturer to affect the final net price to the buyer, thereby affecting the sale of selected products. Again in theory, such coupons can not only target selected products, but geographic regions and even, through appropriate distribution of the coupons, selected customers.
In practice, however, coupons have been found to be extraordinarily ineffective. Tens of billions are often printed to generate a paltry two or three percent use rate. Coupon distribution is, as a practical matter, uncontrollable. The manufacturer coupon represents, at best, an expensive, unwieldy, and poorly effective method by which the manufacturer can exert minimal control over the retail price.
Manufacturer rebates are another program by which manufacturers attempt to influence retail pricing. Rebates suffer from the same problems as coupons; they are expensive, untargeted, and have the further problem of being inconvenient for the consumer to use. Like coupons, rebates exert a relatively modest affect on the retail price.
In more industrious and extensive attempts to manage the retail process, manufacturers have participated directly as retailers through activities such as factory outlets and direct catalog sales. Factory outlets, while of limited success in moving ‘seconds’ (i.e. defective goods) and expiring product lines, create very significant problems which limit their further use. In their most negative aspect, factory outlets place manufacturers into direct competition with their channels, creating ill will, and often direct conflict their retail partners.
Catalog sales suffer the same problem as manufacturer outlets. Further, both efforts—factory outlets and catalog sales—require a manufacturer to enter and compete directly in the field of direct-to-customer sales. Such direct participation in customer sales requires a significant investment in resources, and business which manufacturers typically have not been required to develop. More specifically, manufacturers often do not possess retail skills in the traditional areas of distribution, marketing, and direct customer support necessary to compete effectively in direct customer sales. JCPenney is an example of a retailer who, through the focused utilization of both retail and direct marketing skills, has developed a highly successful catalog business. The success of the JCPenney operation, where catalog orders may be collected through a local retail outlet, has been credited in large part to the application of local store retail skills to the catalog portion of the business. Such retail skills directly illustrate what most manufacturers are lacking.
In addition to the problems described above, catalog sales and related indirect sales suffer from the drawback of making the customer wait for delivery of a product. Associated with any direct retail sale is the well-recognized feeling of instant gratification felt by the customer when exiting the store with the product in hand. When a product is ordered through a paper or electronic catalog (or other indirect channel such as a catalog store), the customer is forced to wait from one day to several weeks to receive delivery of the purchased goods. Not only does this wait diminish any feelings of instant gratification, but it will almost certainly discourage impulse purchases, and may even discourage the customer from purchasing any goods at all.
The advent of new technologies, such as electronic communications and the Internet, have enabled substantial improvements and enhancements to many phases of the retail process as described above. However, to the best knowledge of applicants, uses of such enabling technologies are generally limited to enhancing and improving the conventional retail process paradigm. No uses that are known to applicants permit or enable a manufacturer to significantly, or more directly affect customer price. Further, in most instances known to applicants, enabling retail technology has been applied to the benefit of the retailer, and not the manufacturer.
As one example of the application of technology for the benefit of the manufacturer, the traditional coupon process described above has been implemented online to provide electronic coupons. However, not only do such coupons suffer many of the drawbacks described above with respect to traditional coupons, but they require printing by the consumer and hence are less convenient for most customers to use. They are also easily susceptible to fraud and counterfeiting, especially by those possessing the computer systems and expertise necessary to locate and print them.
Another application of new technology to an old sales paradigm for the benefit of the manufacturer is the implementation of an online sales ‘site’ (i.e. an electronic web page or web site). As practiced by a manufacturer, such a website typically takes the form of an on-line catalog or ‘mall’. While yielding the manufacturer direct control of the retail process, such activities subject him to the same drawbacks and problems encountered with outlets and direct catalog sales as discussed above.
Examples of retail systems that use Internet technologies to supplement known sales processes for retailers include CYBERSLICE, a pizza sales system wherein buyers order pizza on the net at store-set prices, and subsequently pick up the pizzas at the store. PEAPOD is an example of an Internet subscription grocery service wherein orders placed over the net are, for a fee, filled by PEAPOD and delivered from a local grocery. Further websites exist where franchisers and franchisees advertise the costs of goods and/or services, with fulfillment being conventionally through the franchisee/retailer.
Another arena where technology has improved the retail process is that of reservation-type businesses typically practiced by distributed chains or franchises. Such businesses include, for example, hotels and automobile rental companies. A customer wishing, for example, to make a reservation at a Hyatt hotel may contact a central Hyatt authority, or a local Hyatt hotel. A price is determined, and the inventory records of both the Hyatt authority and the local Hyatt hotel are updated to reflect the reservation. Technology including the Internet and other computer network and communications systems functions to increase user access to the goods and services, and to improve inter-company processes and communications. Such business models permit a central authority such as a franchiser to have some affect on customer pricing. However, these business models represent ‘closed’ systems where product and services prices are agreed upon and limited to application within the particular franchise arrangement or company.
In all systems currently known to applicants, whether implemented with time-tested processes or state-of-the-art technologies, the sales paradigm remains traditional; the manufacturer surrenders substantially all control over the retail pricing of his products and services in exchange for access to the skills of the retailer. As discussed above, these skills are typically focused in the areas of product distribution and marketing, and customer support.
There thus exists a need for a truly new and effective sales and distribution system which permits a manufacturer to legally and effectively exert control over the ultimate price to the customer of his goods and services. Such a system should desirably operate cooperatively with retailers, preferably utilizing the strengths of the both the manufacturers and retailers. Such a system should enable a manufacturer to manipulate the customer price sufficiently to meet his own goals, while preferably maintaining the goodwill and profitability of the distributors and retailers.